Continental micro-lender, Letshego Holdings Limited is expecting ‘flat’ profits for the just ended year, as a result of cash injections that the company made into some projects last year, Chairman John Burbidge has announced.
Strong growth in loans and advances in the year ended January 2014, were not enough to steer the company to improved profitability. “This (the flat results) is a result of the pressure on margins and various strategic investments in technology and group expansion initiatives,” said Chairman Burbidge on Wednesday. The company has been on a massive cash raising exercise targeted for expansion within Africa. For the twelve months to January 2013, the company made a profit of P659, 6 million, up by 12 percent when compared to prior year. Furthermore, shareholders will have to take the fact that Earnings Per Share (EPS) will also be lower when compared to the year before, said the Botswana Stock Exchange (BSE) listed boutique.
The fall in EPS is due to the conversion of a loan into equity in the past year, said Burbidge. In the last financial results of 2013, the company said they have received a notice from ADP I Holding 2 that they (ADP Holdings) will convert the loan and accrued interest of P252, 969,373 into ordinary shares in the company using the shareholder approved conversion price of P1.60 per share. Letshego, which boasts of a market capitalisation of P5, 2 billion, has also notified shareholders in Botswana, Mozambique and Namibia of topped other subsidiaries as far as loans and advances are concerned.
Advances for the group up to January 2013 jumped by 10 percent. The strong loans uptake in the local economy, beat Letshego former Chief Executive Jan Claassen‘s forecast that non-increase in salaries for civil servants and poor economic growth will pose a threat to profitability going forward. It seems interest rate cuts in the past year have not affected the company operations in Botswana. It remains to be seen if the biggest listed micro-lender will change its approach (of limiting expose to the country) when extending loans and advances as they previously said.
Letshego, which is led by Chris Low, will publish the audited results mid April 2014. Market did not quickly react to the company unchanged profits, as its share price stood, just like its profits, flat at 241 thebe. Meanwhile, Burbidge has not stated in the notice if they are still pursuing a banking license application with Bank of Botswana (BoB) after an earlier one was out-rightly rejected for undisclosed reasons.